The abolition of self cert mortgages following the credit crunch closed a loophole which allowed the self employed to invent an income to suit the property they intended to buy.
Naturally banks became far more cautious about lending to anyone they regarded as higher risk and this continues to be the case today. While getting a mortgage can be difficult in the current climate it is not impossible.
As long as you are able to prove you have sufficient income, provide evidence of your net profit and have a good clean credit file it is perfectly possible to secure the mortgage you need.
What your mortgage lender requires if you are self employed
As we have established the burden rests on you to provide proof of your income and lenders will go over everything to make sure they are happy to grant you a mortgage.
The main documentation and qualifying criteria you will need are as follows:
- A strong track record of regular work.
- Ideally 2 years of accounts prepared ideally by a certified or chartered accountant. Lenders look more favourably on accounts prepared by someone qualified.
- Sufficient funds to put down a deposit which is normally at least 10% of the value of the property you wish to purchase.
- A strong credit history
Stability and consistent income are key to getting a mortgage when you are self employed and this isn’t always possible when you are self employed.
If you have had a few years when income hasn’t been great, don’t worry too much, lenders will take an average of the information you provide which can make up for any lean periods you may have experienced being self employed or working as a freelancer.
If all this sounds daunting, don’t worry, we can guide you through the entire process and ensure you paperwork is all in order before submitting your application.
What self- employed people should avoid when applying for a mortgage
- Don’t try to minimise your income to pay less tax. What you save in tax could count against you when you apply for a mortgage and income is seen as insufficient.
- Don’t try to do your accounts yourself. Lenders prefer you to use a certified or chartered accountant.
- Don’t assume that getting a mortgage is impossible. There are plenty of options out there and using a whole of market mortgage broker will help you find the best products.